Tuesday, January 8, 2008

Venezuela launches new currency

Venezuela is launching a new currency with the new year, lopping off three zeros from denominations in a bid to simplify finances and boost confidence in a money that has been losing value due to high inflation.

President Hugo Chavez's government says the new currency - dubbed the "strong bolivar" - will make daily transactions easier and cure some accounting headaches.

Officials also say it is part of a broader effort to contain rising prices and strengthen the economy.

"We're ending a historical cycle of ... instability in prices," Finance Minister Rodrigo Cabezas said, adding that the change aims to "recover a bolivar that has significant buying capacity."

Prices have risen as Chavez has pumped increased amounts of the country's oil income into social programmes, reinforcing his support among the poor and helping to drive 8.4% economic growth in 2007.

The Central Bank is promoting the new monetary unit with an ad campaign and the slogan: "A strong economy, a strong bolivar, a strong country."

Officials, however, have yet to clearly spell out their anti-inflationary measures.

Some Venezuelan critics, meanwhile, have dubbed the new currency the "weak bolivar", noting its predecessor, the bolivar, has seen its purchasing power suffer in an economy where inflation ran roughly 20% in 2007 - the highest in Latin America.

Venezuelan economist and pollster Luis Vicente Leon said that while the new currency may provide "the perception of stability" for some, it is largely a "cosmetic change".

Government officials say the change is overdue to bring Venezuelan denominations into line with those of other countries in the region. Instead of denominations in the thousands, the largest new Venezuelan note will be 100 strong bolivars.